Section 48: Stock companies; formation; capital; stock; options; promoter defined
Section 48. As used in this section, the following words shall, unless the context clearly requires otherwise, have the following meanings:—
''Minimum capital'', the common capital stock that must constantly be maintained by a stock insurance company as required by this section.
''Surplus'', the excess of admitted assets over the sum of capital and liabilities.
''Minimum surplus'', the surplus that must constantly be maintained by an insurance company as required by this section in the case of a mutual company, minimum surplus shall be equal to the combined minimum capital and minimum surplus requirements specified for stock insurance companies in this section.
Ten or more persons residents of this commonwealth may form a stock company (a) to transact the business set forth in any one of the clauses set forth in section forty-seven, excepting the third or seventeenth, (b) to transact the business set forth in the first and eighth clauses thereof, (c) to transact the business set forth in the first and second clauses thereof, in the first and seventeenth clauses thereof, in the first, second and eighth clauses thereof, or in the first, second, eighth and seventeenth clauses thereof, (d) to transact the business set forth in any two or more of the fourth, fifth, sixth, seventh, eighth, ninth, tenth, twelfth and thirteenth clauses thereof, or (e) to transact the business set forth in the sixth and sixteenth clauses thereof.
Companies organized under this section shall have a paid-up capital as follows:
Under the sixth clause, to insure only against sickness and against the bodily injury or death by accident of the insured; and under the seventh, thirteenth and nineteenth clauses, not less than one hundred thousand dollars.
Under the first, first and eighth, fourth, fifth, except as otherwise provided herein, eighth, ninth, tenth, or twelfth clauses, not less than two hundred thousand dollars.
Under the sixth clause, except as otherwise provided herein, not less than four hundred thousand dollars.
Under the second clause, and under the first and second clauses excepting ocean marine insurance, and under the first, second excepting ocean marine insurance, and eighth clauses, not less than three hundred thousand dollars.
Under the first and second clauses, under the first and seventeenth clauses, under the first, second and eighth clauses, and under the first, second, eighth and seventeenth clauses, not less than four hundred thousand dollars.
Under the eleventh clause, not less than one hundred thousand dollars; and if insurance against the insufficiency of mortgages as security or against any other loss in connection with mortgages, except insurance of titles is transacted, not less than two hundred thousand dollars.
Under the fourteenth or fifteenth clause, not less than five hundred thousand dollars.
Under two or more of the clauses enumerated herein under (d), the paid-up capital shall not be less than the largest amount required for the transaction of the kinds of business specified in any one clause which it is authorized to transact, and an additional amount equal to one half of the minimum capital required above for the transaction of the kinds of business specified in each additional clause which it is authorized to transact.
Under the sixteenth clause, not less than four hundred thousand dollars, or under the sixth and sixteenth clauses as provided under (e), not less than eight hundred thousand dollars, together, in either case, with a net cash surplus of not less than eight hundred thousand dollars, exclusive of said capital.
Companies organized under this section shall have and shall maintain capital and surplus as set forth below; provided, however, the combined capital and surplus amount for any company subject to the provisions of this section, transacting a single line of insurance business, shall not be less than one million two hundred thousand dollars.
Capital shall be computed as follows:
(a) Under the first and eighth, fourth, fifth, except as otherwise provided herein, eighth, ninth, tenth or twelfth clauses, not less than two hundred thousand dollars.
(b) Under the second clause, and under the first and second clauses excepting ocean marine insurance, and clause eighth, not less than three hundred thousand dollars.
(c) Under the first and second clauses, under the first and seventeenth clauses, under the first, second and eighth clauses, and under the first, second, eighth and seventeenth clauses, not less than four hundred thousand dollars.
(d) Under the sixth clause, not less than four hundred thousand dollars of capital; and if, under the sixth clause, insurance to insure only against sickness and against the bodily injury or death by accident of the insured is transacted, not less than one hundred thousand dollars.
(e) Under the seventh, thirteenth and nineteenth clauses, not less than one hundred thousand dollars.
(f) Under the eleventh clause, not less than one hundred thousand dollars of capital; and if insurance against the insufficiency of mortgages as security or against any other loss in connection with mortgages, except insurance of titles is transacted, not less than two hundred thousand dollars.
(g) Under the fourteenth or fifteenth clauses, not less than five hundred thousand dollars.
(h) Under the sixteenth clause, not less than four hundred thousand dollars of capital, or under the sixth and sixteenth clauses, not less than eight hundred thousand dollars.
(i) Under two or more of clauses fourth, fifth, sixth, seventh, eighth, ninth, tenth, twelfth and thirteenth, the capital shall be the largest amount for any one of these clauses, plus one-half of the total of all other clauses listed in this paragraph which it is authorized to transact.
Surplus shall be computed as follows:
(a) Under the fourth, fifth, seventh, ninth, tenth, eleventh, thirteenth, and nineteenth clauses, not less than two times the amount of capital as prescribed above.
(b) Under the first, second, eighth, twelfth, sixteenth and seventeenth clauses, not less than four times the amount of capital as prescribed above.
(c) Under the sixth, fourteenth and fifteenth clauses, not less than six times the amount of capital as prescribed above.
The common capital stock and the surplus required by this section shall be paid in cash within twelve months after the date of the charter or certificate of organization, but not certificates of full shares and no policies shall be issued until the capital and surplus as aforesaid is paid in.
The commissioner may adopt rules, regulations and guidelines, from time to time requiring any company incorporated, licensed or authorized to engage in the insurance business, to have and constantly maintain capital and surplus levels in excess of the statutory levels required by this section based upon any of the following factors:
(1) the nature and type of risks a company underwrites or reinsures;
(2) the premium volume of risks a company underwrites or reinsures;
(3) the composition, quality, duration or liquidity of a company's investment portfolio;
(4) fluctuations in the market value of securities a company holds;
(5) the adequacy of a company's reserves; or
(6) size of a company's asset valuation reserves and interest maintenance reserves.
The rules, regulations or guidelines adopted under this section shall be designed to assure the financial solvency of companies for the protection of policyholders.
The capital and surplus requirements imposed under this section shall apply to each insurance company incorporated, licensed or authorized to do business in the commonwealth; provided, however, that a company whose combined direct and assumed premium in the prior calendar year does not exceed one hundred thousand dollars may make written application to the commissioner for an exemption from the minimum capital and surplus requirements in this section. The commissioner may permit an exemption for a period not to exceed one year, provided the company makes a written commitment to write no more than one hundred thousand dollars in combined direct and assumed premium in the year in which the exemption applies. The commissioner's approval of such an exemption shall be in writing and may contain such other restrictions as the commissioner deems appropriate.
The commissioner may establish, by rule, regulation or guideline, a procedure which will require a company subject to the provisions of this section to increase its capital and surplus amounts over a specified period of time, not to exceed five years, until the required statutory minimums established by this section, or higher levels as ordered by the commissioner, are met.
Such companies shall authorize and issue only nontradable options and warrants. Such options or warrants shall not be issued to promoters except at the time of original issue and then only if (a) the total number of shares of stock covered by all options and warrants does not exceed ten per cent of the total number of shares of stock originally authorized and issued for cash or property; (b) the price at which stock may be purchased upon exercise of such options or warrants is not less than the price at which any stock was offered for sale to the public at the time such options or warrants were granted, but in no event shall the purchase price thereof be less than the fair market value of the stock to be purchased at the time such options or warrants were granted; and (c) the options and warrants are not transferable except by operation of law as a result of death or with the prior written approval of the commissioner and are not exercisable more than five years after date of issuance. If options or warrants are issued in payment of promotional expenses, such issuance must be justified to the commissioner by a showing of the nature of the services or other considerations for which issued. The aggregate of all organizational expenses and promotional expenses shall not exceed ten per cent of the total amount actually paid on the company's capital stock. Options or warrants may be issued to insurance agents only in accordance with rules prescribed by the commissioner.
The word ''promoter'', as used in this section, shall mean any person who, acting alone or in conjunction with one or more other persons, directly or indirectly takes initiative in founding and organizing any company organized under this section.